Paul J. Myer and Carole A. Myer v. Mark Whitacre, Ginger Whitacre and Fran Haworth, individually and D/B/A Century 21 Haworth Homes

PAUL J. MYER and )
CAROLE A. MYER, )
)
Plaintiffs/Appellees, )
) Appeal No.
) 01-A-01-9701-CH-00014
VS. )
) Williamson Chancery
) No. 23547
MARK WHITACRE, )
GINGER WHITACRE and FRAN )
HAWORTH, individually and d/b/a
CENTURY 21 HAWORTH HOMES,
)
) FILED
)
Defendants/Appellants. ) July 2, 1997
Cecil W. Crowson
COURT OF APPEALS OF TENNESSEE Appellate Court Clerk
MIDDLE SECTION AT NASHVILLE
APPEALED FROM THE CHANCERY COURT OF WILLIAMSON COUNTY
AT FRANKLIN, TENNESSEE
THE HONORABLE HENRY DENMARK BELL, JUDGE
HUGH C. HOWSER, JR.
2500 Nashville City Center
511 Union Street
Nashville, TN 37219
Attorney for Plaintiffs/Appellees
LISA M. CARSON
306 Court Square
Franklin, TN 37064
Attorney for Defendants/Appellants Mark Whitacre and Ginger Whitacre
AFFIRMED AND REMANDED
BEN H. CANTRELL, JUDGE
CONCUR:
TODD, P.J., M.S.
KOCH, J.
OPINION
In this case involving a breach of a real estate contract, the appellant
asserts that the evidence preponderates against the amount of damages found and
the award of prejudgment interest. We affirm the judgment of the trial court.
I.
In July of 1995 the sellers and buyers executed a contract for the sale
of a house and lot at 2021 Lynnwood Drive in Franklin for $935,000. Closing was set
for August 11, 1995. On August 9, 1995 the purchasers notified the sellers that they
would be unable to complete the sale.
The sellers immediately put the property back on the market but were
unable to make a sale until June of 1996, when the property sold for $845,500. In an
action against the purchasers for breach of contract, the chancellor awarded the
sellers $89,500 as general damages for the breach (plus special damages that are not
at issue here). The court also awarded prejudgment interest from the original closing
date of August 11, 1995.
II.
The parties agree that the correct amount of damages for the breach of
a contract for the sale of real estate is the difference between the contract price and
the fair market value of the property as of the date of the breach. Yarbrough v. Stiles,
717 S.W.2d 886 (Tenn. App. 1986); Turner v. Benson, 672 S.W.2d 752 (Tenn. 1984).
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The date of the breach is ordinarily the closing date. Id.1 The parties diverge as to
what proof is relevant to the question of the fair market value at the time of the breach.
This record shows that immediately after the sale fell through the sellers
had their agent contact other prospective buyers who had expressed an interest in the
property. None of the prospective buyers responded. The agent advertised the
property and aggressively sought to market it, because the sellers had partially moved
out in order to give possession to the buyers. The agent’s efforts, however, failed to
produce a willing buyer until June of 1996.
The agent testified that in her opinion the value of the house in July or
August of 1995 was in a range of $920,000 to $980,000. She said that when a house
first comes on the market there is a short window of opportunity when buyers compete
for the property, but that when the sale fell through, the excitement was gone and
people were not as interested as they had been.
One of the sellers testified that he thought the $935,000 was a fair price
for the house in the summer of 1995. In fact, within a few days of listing the house for
sale, the sellers received an offer for $900,000.
The buyers contend that what the property sold for ten months later is
irrelevant. Therefore, they argue, the only evidence in the record is that the property
was worth between $920,000 to $980,000. We disagree. We think that what the
property finally sold for is some evidence of its value at the time of the breach. In
Turner v. Benson, 672 S.W.2d 752 (Tenn. 1984), a case where the property sold a
year later for $1,000 more than the previous contract price, the Supreme Court said:
1
It is arguable that the buyers breached the contract when they announced on August 9, 1995
that they wo uld no t com plete th e sa le. But neither party makes an issue of the difference in the two
dates.
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“[C]onsidering the resale to have taken place only about
one year after the breach, and it being an arms-length
transaction, rather than a forced sale at auction, we think
it reasonable to infer that the fair market value of the
plaintiff’s residence at the time of the breach was roughly
equivalent to the contract price.”
672 S.W.2d at 755. While the resale price is not conclusive, as the sellers contend,
it is some evidence of the value -- especially where the property has been
aggressively marketed in the intervening months and is sold in an arms-length
transaction.
The chancellor’s finding with respect to the value of the property at the
time of the breach is presumed to be correct, unless the preponderance of the
evidence is otherwise. Rule 13(d), Tenn. R. App. P. We can’t say that the evidence
preponderates against that finding. The evidence is not clear either way. The
testimony of the selling agent and of one of the sellers, while competent, is certainly
not conclusive. Their opinions were based on estimates of value and not on a study
of the market. We therefore affirm the chancellor’s finding of the difference between
the contract price and the value at the date of the breach.
III.
Prejudgment Interest
The chancellor awarded prejudgment interest at 10% per annum on the
net judgment from the date of the breach. The purchasers insist that the sellers did
not ask for prejudgment interest in their complaint and did not specify prejudgment
interest as an element of their damages in answering the purchasers’ interrogatories.
In addition, they assert that the chancellor abused his discretion by awarding
prejudgment interest when there was a genuine controversy over the amount of the
damages.
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The award of prejudgment interest in Tennessee is governed by statute.
Tenn. Code Ann. § 47-14-123 provides:
Prejudgment interest, i.e., interest as an element of, or in
the nature of, damages, as permitted by the statutory and
common laws of the state as of April 1, 1979, may be
awarded by courts or juries in accordance with the
principles of equity at any rate not in excess of a
maximum effective rate of ten percent (10%) per annum
....
The statute allows prejudgment interest as an element of damages “to be allowed in
accordance with the principles of equity.” Schoen v. J.C. Bradford & Co., 667 S.W.2d
97 (Tenn. App. 1984).
With respect to the fact that prejudgment interest was not raised in the
complaint, we find from the record that the issue was in fact tried by consent. See
Rule 15.02 Tenn. R. Civ. P. The record is clear that at the beginning of the trial, the
plaintiffs were asserting the right to collect prejudgment interest. The defendants’ only
objection was on the merits -- not on the fact that the point had not been raised in the
pleadings. We also note that prejudgment interest is not considered special damages
that must be pled specially. Mitchell v. Mitchell, 876 S.W.2d 830 (Tenn. 1994).
We think the question of prejudgment interest was within the discretion
of the chancellor, and we find no abuse of that discretion. See B.F. Myers & Son v.
Evans, 612 S.W.2d 912 (Tenn. App. 1980). If the difference in the contract price and
the value was $89,500 on August 11, 1995, the sellers were deprived of that benefit
from and after that date. In order to be made whole, they should be compensated for
the loss of use of that benefit. We do not think the chancellor abused his discretion.
We affirm the judgment of the trial court and remand the cause to the
Chancery Court of Williamson County for any further proceedings necessary. Tax the
costs on appeal to the appellants.
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________________________________
BEN H. CANTRELL, JUDGE
CONCUR:
_______________________________
HENRY F. TODD, PRESIDING JUDGE
MIDDLE SECTION
_______________________________
WILLIAM C. KOCH, JR., JUDGE
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